Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly

Roberto Cellini and Guido Candela
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Guido Candela: Dipartimento di Scienze Economiche, Università di Bologna

No 2004.20, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We present a theoretical model in tourism economics, assuming that the market for tourism is an oligopoly with differentiated products. Destinations (i.e., countries, regions, sites or even firms) can invest in order to improve their carrying capacity that can be interpreted as the stock of physical, natural or cultural resources. Tourism flows yield current revenues, but they are usually detrimental for the cultural or natural resource stock over time. We find the solution of the dynamic model, and in particular we find the open-loop Nash equilibrium of the game among the destinations, under alternative settings, depending on whether the arrivals are exogenous or endogenous, and depending on whether the degree of differentiation among destinations is exogenous or endogenous. The model is rather general, and it can provide answers to different specific questions, like the choice between mass- vs. elite-tourism development strategies; the effect of the number of competing products upon profits; the optimal degree of product differentiation.

Keywords: Tourism; Differentiated games; Reservation price (search for similar items in EconPapers)
JEL-codes: D43 D92 L83 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (4)

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Journal Article: Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2004.20

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